Policymakers continue to ignore that high construction costs are a major contributor to the Republic’s housing crisis, prominent builder Michael O’Flynn said on Thursday.
Addressing the Urban Land Institute Ireland’s (ULI) conference in Dublin, Mr O’Flynn said the State had based policy on a “housing needs assessment that does not deal with the fact that a lot of housing is not viable”.
He argued that policymakers continually failed to grasp that high building costs were a key part of the housing problem.
“When I look at the cost base today, I can understand that we cannot produce the supply that’s necessary,” Mr O’Flynn said.
He added that the Government and others had become “completely and utterly carried away” by the planning aspect, but were not dealing with the cost issue.
Mr O’Flynn, chairman and chief executive of O’Flynn Group, maintained that the Government was not dealing with the problem if it was not facing up to the economic aspects.
He highlighted the 13.5 per cent VAT on construction and the fact that local authorities did not zone enough land where it is needed for housing among the costs that inhibited new home construction.
“I am saying here today that you have a problem and you are not dealing with it,” he said.
Mr O’Flynn also criticised the Government’s new €450 million Croí Cónaithe apartment subsidy scheme as it required builders to fund projects without knowing the final sales value.
The Government needs to accept there is a housing “emergency” not a housing crisis, Alexandra Sheeran of CBRE told the conference.
Ms Sheeran said more than half of 250 professionals, 70 per cent of them under 40, surveyed by ULI’s young leaders’ group, were renting or living with parents.
She told the gathering that most were earning more than €80,000 a year working in finance, real estate, the professions, technology or construction.
Most of those who did not own their homes cited rising prices or mortgage lending rules as the main barrier.
Renters’ problems are further compounded by the fact that they pay 20 per cent to 40 per cent on accommodation, while those with mortgages paid a maximum of 30 per cent.
Those who did not own their homes favoured apartments in or close to city centres over traditional suburban houses, Ms Sheeran said.
“Their preference is for an urban setting at a good price and a decent size,” she added.
Adrian Byrne of Hibernia Reit — whose chief executive Kevin Nowlan chairs the ULI — pointed out at the event that mortgage lending rules meant most buyers could not afford apartments, even while these were most suitable for their needs.
Apartments cost up to €450,000 each to build, while lending rules limit buyers to between €300,000 and €350,000.
He said that bridging the gap would require allowing home hunters to borrow more, cutting building costs or subsidising buyers.